The continuing wheat crisis can be traced, among other things, to lack of authentic estimates of production, and inaccurate determination of requirements.
Proper planning for imports and exports can be done only when supply and demand situation is fairly accurate.
In Minfal, APCom has to give more attention to these aspects. Needless to say that economic analysis work in the ministry needs to be improved and strengthened considerably, particularly in terms of manpower and their ability.
Too many changes at the Secretary’s level, lack of decision making ability, interest, and understanding at higher level, in the past, could be some of the reasons for this state of affairs.
The government initially fixed the wheat target of producing 20 million tons from 8.18 million hectares for the crop sown in 2003 and harvested in 2004. Against this, the Federal Committee on Agriculture (FCA) revised in October 2004 the estimates to 19.5 million tons from 8.2 million hectares. Punjab is said to have produced 15.64 million tons from 6.26 million hectares giving a yield of 2.5 tons/hectare.
The support price of wheat was raised to Rs350 per 40kg, up by Rs50 from that of the previous year. As about 80 per cent of wheat production is raised by Punjab so any variation in its production affects national production.
The information available from various sources indicates that the yield per acre of the crop harvested in 2004 was, on an average, about the same as that of the last year in main growing areas of Punjab.
On this basis, the production from Punjab would have been a little over 12 million tons. The production of wheat of other provinces, as given in the FCA meetings, comes to about 3.9 million tons.
Therefore, the country’s total production would be little around 16 million tons i.e., down by about 3.5 million tons than the projection of 19.5 million made by the FCA. APCom had worked out the requirements varying from 19.8 to 21.6 million tons based on the annual per capita consumption of 107 and 119kg, respectively.
Thus, the gap between demand and supply is anything from 3.8 million to 5.6 million tons. According to Minfal, only about 200 thousand tons was carried forward from the previous year.
The government had planned to procure a little over six million tons (both by the Food Departments and Passco), but it could only procure about 3.5 million tons. It is said that as the private sector was also allowed to enter the market, which purchased approximately one million tons, so the target remained unachieved.
Because of the shortage of crop, the free market prices were ruling higher than the support price. According to support price policy concept, if open market prices are higher than the support price, the government is not supposed to interfere in market operation but to allow farmers to reap the benefit of better prices.
However, the Punjab government, as reported in the press, not only forcefully procured wheat from the farmers but also banned the inter-provincial and even the inter-district movement; the action was presumably to arrest smuggling from the border provinces to neighbouring country and to facilitate the government in its procurement drive.
This created panic in the country. The wheat and flour price shot up to a level never experienced before. The deficit provinces started protesting against the action taken by Punjab.
The situation was getting out of control, when the finance minister/prime minister took a wise, though belated, action and directed the authorities concerned to import five hundred thousand tons of wheat in the first instance and another five hundred thousand tons at a later stage.
These imports were not considered enough to arrest the hike in the consumer’s price. Therefore, the Prime Minister ordered the import another five hundred thousand tons of wheat over and above the one million tons already ordered.
It is quite doubtful if this import of 1.5 million tons would be able to stabilize the prices. The months of February to middle of April are very crucial and it is in these months that prices tend to rise because the reserve stocks generally get depleted.
It is the writer’s view that the government would have to import another 1.5 million tons if the prices at the end of wheat year have to be maintained at affordable level and some reserves must be built for the following year.
At present, the prospects of next year’s wheat crop (to be harvested in 2005) are quite bleak as water shortage during the coming Rabi crop is going to be about 45-47 per cent less than the normal.
Let us hope that the slogan “Produce More Wheat” instead of “Grow More Wheat” shows its positive impact on the size of the crop. The government has to be sensitive to meeting the needs of the population for such an important strategic commodity.
With such a commodity, it is better to be on the “safe side”, rather than to remain on the “conservative side”, as it can have quite serious political repercussions.
In a situation like the one the country has experienced during the last one-year, prompt decision and action need to be taken to meet the critical shortage of a strategic commodity like wheat.
Presently, the provincial governments make their estimates of crop production on the basis of its Crop Reporting Services and then pass on to the Federal Bureau of Statistics (FBS), who consolidates these and forwards to Minfal, which in turn releases it to the public.
Earlier, there was some mechanism in the FBS for rechecking these estimates but with the passage of time; it seemed to have faded away. Presently, there is no such system in Minfal. If Minfal had given some credibility to its Technical Committee’s report of July 2003, the crisis could have averted.
Punjab seems to be loosing its credibility in crop estimating. There is an urgent need for the improvement of procedure for estimation of the crop size not only by Punjab but also by other provinces.
The Crop Reporting Services (CRS) too, have to be given more freedom of action and should not be influenced by the politicians and bureaucracy. The methodology used by the CRS, which has been in vogue for more than half the century has to be reviewed. More effective supervision of the field staff is called for.
The FBS and Minfal need to revive the system to scrutinize the estimates received from the provincial governments. Minfal, in particular, has to develop its analytical capacity for the purpose. Provincial experts have also to be encouraged for such analysis.
Determination of the demand side has to be improved. It may be advisable to set a group of experts to review the present system to suggest improvements. Without having reasonable estimates of production and requirements, planning for imports and exports remains a difficult problem.
It would be helpful, if a Wheat Crop Production Assessing Committee, on the pattern of the Cotton Crop Assessment Committee, is set up to give periodically the idea of likely production. This would be of indicative nature to help the authorities concerned in planning the likely import/export programme.
Past experience has shown that the “free marketing” system has not worked under our conditions. The experience of wheat and fertilizer marketing are glaring examples of the failure of this system.
The implementation of the support price declared by the government should be carried out efficiently and effectively in its true spirit; otherwise the government has to face the criticism.
Courtesy: The DAWN